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On June 8, the Eighth Circuit Court of Appeal heard oral argument in the Capitol Records v. Thomas-Rasset filesharing case. The oral argument addressed two issues: (1) whether the Copyright Act grants a copyright owner the exclusive right to “make available” works to the public; and (2) whether a statutory damages award that is within the range set by Congress can nonetheless be constitutionally excessive. The (third) jury in the case rendered a verdict of $80,000 per song infringed, for a total of $1.92 million, which the District Court remitted to $2,250 per song (three times the statutory minimum).

I will post the opinion when it is available. In the meantime, diehards can listen to the oral argument here.

On April 4, the First Circuit Court of Appeals will hear oral argument in Sony v. Tenenbaum, the first constitutional challenge to a statutory damages award to reach the appellate level. The case pits the recording industry against Joel Tenenbaum, who, as a college student, downloaded and made available for distribution thousands of songs using multiple filesharing services over a period of years. A group of recording companies sued Tenenbaum for infringing 30 of those songs. The trial court rejected Tenenbaum’s fair use defense and directed verdict against him. The plaintiffs elected statutory damages and the parties proceeded to a jury trial. The jury found that Tenenbaum had acted willfully and awarded the plaintiffs $22,500 per song, for a total verdict of $675,000.

Tenenbaum moved for a new trial, arguing that the statutory damages award was unconstitutionally excessive as applied. Alternatively, he sought remittitur, a common-law procedure allowing the judge to reduce an award that “shocks the conscience.” If a judge grants the request and reduces the award, the plaintiff may elect either to accept the remitted award or proceed to a new trial. The recording industry plaintiffs, however, indicated to the judge that they would not accept any remitted award. As a result, the Court felt constrained to address the constitutional issues, despite courts’ usual preference for avoiding ruling on constitutional questions if a dispute can be resolved on other grounds.

Before reaching the merits of the constitutional issue, the Court addressed two dueling standards for assessing the appropriateness of damages awards: St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67-68 (1919) and BMW v. Gore, 517 U.S. 559, 568 (1996). In Williams, the Supreme Court upheld a $75 statutory damages award against a railroad that had overcharged passengers by 66 cents per ticket, which amounted to 114 times the amount of the plaintiffs’ actual damages. The Supreme Court upheld the award because it was not “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” In reaching this conclusion, the Supreme Court took into account the following factors: the ratio of the award to the plaintiffs’ actual damages; the interests of the public; the “numberless opportunities” for the railroad to commit the offense; and the need for securing uniform adherence to established passenger rates.

Gore, in contrast to Williams, involved punitive, not statutory, damages. In Gore, the jury awarded $4,000 in compensatory and $4,000,000 in punitive damages for BMW’s failure to disclose that the plaintiff’s “new” car had been repainted before it was sold to him. The Supreme Court struck the award under the Due Process Clause, following three “guideposts”: the degreee of reprehensibility of the defendant’s conduct; the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and the difference betwen the jury’s punitive award and civil penalties authorized in comparable cases.

The Tenenbaum court found little distinction between the two approaches, reasoning that both cases seek to protect defendants from damages awards that are “grossly excessive in relation to the objectives that the awards are designed to achieve.” The court ultimately applied the three Gore guideposts to the jury’s award, while noting two factors that distinguish the award from typical punitive damages awards: the award fell within the statutory range authorized by Congress; and the statute clearly sets forth the maximum and minimum allowable amounts.

Degree of reprehensibility of defendant’s conduct

This is “perhaps the most important” indicator of the reasonableness of a punitive award. The court characterized filesharing as “relatively low on the totem pole of reprehensible conduct.” Tenenbaum caused economic, not physical, harm. He displayed no indifference or reckless disregard of the health or safety of others. The recording companies were not financially vulnerable. On the other hand, the court acknowledged that Tenenbaum’s conduct was willful, and that he had lied under oath and tried to shift blame. Thus, “among this group of comparatively venial offenders, Tenenbaum is one of the most blameworthy.”

Disparity between plaintiffs’ actual harm and the award

The court reasoned that the Copyright Act requires at least some relationship between the actual harm suffered and the statutory damages award. It focused solely on Tenenbaum’s individual conduct, refusing to take into account the activities of other filesharers because “the jury was not permitted to punish Tenenbaum for harm caused by other infringers.” Using the $0.70 wholesale iTunes price for music as a “rough proxy” for the plaintiffs’ profits, Tenenbaum’s unauthorized sharing of 30 songs cost the plaintiffs $21 in profits, resulting in a ratio of statuory to actual damages of 32,143:1. The court also noted that services like Rhapsody charge $15 per month for access to millions of songs. The court dismissed the plaintifsf’ contention that the harm was much greater by virtue of Tenenbaum’s having distributed the songs to countless filesharers, resulting in immeasurable lost sales. The court found it “hard to believe that Tenenbaum’s conduct, when viewed in isolation, had a significant impact on plaintiffs’ profits” because he would not have purchased the music if they were not available for free, and the filesharers who downloaded the songs that Tenenbaum made available would simply have gotten them from a free alterntaive source. This reasoning is fairly remarkable; it is comparable to saying that if Tenenbaum had walked out of Barnes and Noble with a backpack full of stolen CD’s and given those CD’s to his friends, Barnes and Noble would have suffered little harm because Tenenbaum and his friends would simply have stolen the CD’s elsewhere.

Difference between the award and comparable civil penalties

The court found this to be the most troublesome factor for Tenenbaum, as the award was well within the range authorized by Congress. But the court concluded that Congress likely did not foresee that such awards would be imposed on noncommercial infringers like filesharers. The court cited a number of facts in support of this theory. First, Congress’s most recent enactment affecting the amount of allowable statutory damages, which increased the maximum potential penalty for willful infringement from $100,000 to $150,000, occurred before peer-to-peer filesharing became prominent. Napster, however, had been in existence for at least six months at that time. Moreover, Congress passed this increase specifically in response to the illegal sharing of software over the Internet. More remarkably, the court cited statements and conduct of various members of Congress outside the context of statutory damages legislation in concluding that Congress did not intend statutory damages to be awarded against individual filesharers. For example, the court noted that during the course of a Senate Judiciary Committee hearing in July, 2000 on music downloading, committee members demonstrated how peer-to-peer filesharing works by downloading songs, and one Senator admitted that he had downloaded songs on his own laptop. Incredibly, the court also cited remarks made by Senator Hatch at a talk at Brigham Young University in which he praised Shawn Fanning, the founder of Napster. Such events hardly rise to the level of legislative history which can be relied upon to illuminate Congressional intent (Justice Scalia would likely spontaneously combust at the very idea).

Finally, the court compared the jury award with the results in other filesharing cases and concluded that it was “especially excessive.” The court noted that the court in the case involving Jammie Thomas-Rasset, the only other filesharer to go to trial, remitted a verdict of $80,000 per song (for a total award of $1.92 million) to $2,250 per song, which amounted to three times the minimum statutory damages award. The court concluded that Tenenbaum’s cuilpability was “roughly comparable” to Thomas Rasset’s, and ultimately concluded that the 3-times statutory damages figure was the “outer limit of what a jury could reasonably (and constitutionally) impose in this case.” Accordingly, the court reduced the award to $2,250 per song, for a toal award of $67,500.

The appeal

Both sides have appealed. The plaintiffs argue that Williams, not Gore, is the appropriate standard, and that the jury’s award is constitutional under either approach. They (properly) fault the judge’s questionable reliance on the post-hoc colloquy of a handful of memberes of Congress as “a textbook illustration of misuse of legislative history to avoid giving due deference to Congress’s determinations . . . manufactur[ing] ambiguity where none exists.” The United States submitted a brief arguing that the lower court should have exercised its power of remittitur before reaching the constitutional issues; it also argues that Congress intended the full range of statutory damages to apply to peer-to-peer filesharing. Tenenbaum argues in favor of the Gore standard, but complains that the court improperly instructed the jury on the entire range of statutory damages without “context,” and that statutory damages were never meant to apply to consumer copies. Links to the parties’ briefs appear below.

The court is scheduled to hear oral argument in just over two weeks, on April 4, 2011. I will post the link to the audio recording of the argument when and if it becomes available.

Ascending to the appellate level is a game-changer in more than one respect. Tenenbaum benefited at the trial level from an extraordinarily friendly judge. Indeed, as I described more fully in my post on the fair use ruling, Judge Gertner actively and overtly searched for reasons to rule in Tenenbaum’s favor. He may not find such a warm welcome at the First Circuit.

Judge Kimba Wood of the Southern District of New York has issued a permanent injunction shutting down the Lime Wire file-sharing service. The injunction follows the court’s ruling in May finding the service liable for inducing copyright infringement.

Gavin McGimpsey, an undergraduate at Kenyon College, is conducting research into file-sharing and attitudes about copyright law. The research is funded by Kenyon College’s John W. Adams Summer Legal Scholars Program in Socio-Legal Studies. Mr. McGimpsey’s research includes a survey directed at those interested in file-sharing and copyright law. If you are interested in participating in the survey, you can find it here. For more information about Mr. McGimpsey and his project, click here.

An Associate Provost at Kenyon College confirmed by telephone today that Mr. McGimpsey is enrolled there, and that he is undertaking this research project in connection with his studies.

Joel Tenenbaum rang in the New Year by seeking a new trial or, alternatively, a reduction of the $675,000 award of statutory damages imposed by a jury last summer for his illegal file-sharing activities. Attempting to capitalize on favorable language in the court’s opinion rejecting his fair use defense, Tenenbaum’s motion trumpeted the court for becoming “the first to recognize a fair use interregnum for copyright infringement following the debut of Napster.” Tenenbaum can’t be blamed for trying to turn lemons into lemonade, but the court recognized no such thing, though it plainly wished to rule otherwise. At most, the court speculated that a file sharer “might” be able to rely on a fair use defense under certain limited circumstances not applicable to Tenenbaum’s conduct, such as by swapping files during the time period “before digital media could be purchased legally, but [] later shift[ing] to paid outlets.”

Fair use

Tenenbaum devoted much of his brief to rehashing the same fair use arguments that the court already (properly) rejected. After praising the court for supposedly establishing the so-called “fair use interregnum,” Tenenbaum faulted the court for cutting it off before his file-sharing was detected in August 2004 due to the fact that “a commercial market for digital music had fully materialized” by then. According to Tenenbaum, early online sellers of digital music did nothing to alleviate the injustice of having to purchase entire CD’s rather than individual songs because they employed encryption technology which restricted purchasers’ ability to transfer songs between different media players. This “boxed music consumers like Tenenbaum into an unfair choice” until the music industry began offering unrestricted copies of songs for sale online in 2007. Tenenbaum also reasserted his “attractive nuisance” argument – that the music industry lured Tenenbaum and other consumers into wrongdoing with their marketing strategies – and bemoaned anew the conscription of parents and universities as “copyright police to regulate internet use” by children and students. None of these arguments is likely to persuade the court that it made a mistake in rejecting Tenenbaum’s fair use defense, which remains, as the court succinctly noted, “completely elastic, utterly standardless, and wholly without support.”

Statutory damages and due process

Tenenbaum buried his most interesting, and potentially most successful, argument at the end of the brief – that the $675,000 statutory damages award is so grossly excessive that it violates his Constitutional right to due process. The Supreme Court has held that statutory damages violate due process where they are “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67-68 (1919). In Williams, the Court upheld a $75 statutory damages award against a railroad that had overcharged passengers by 66 cents per ticket. Relying on the Williams standard, Tenenbaum contrasted the “bankrupting” size of the award with his conduct, which he characterized as “at most comparable to shoplifting music from a record store.” Assuming a purchase price of 99 cents per song, Tenenbaum calculated that the ratio between the award and the actual damage to the plaintiffs was 22,500 to 1 – far in excess of the 113 to 1 ratio which the Williams Court found acceptable.

The shoplifting analogy is a compelling one. The consequences for theft can be severe, but it is almost inconceivable that Tenenbaum would have been assessed a six-figure penalty for walking out of a record store with a handful of CD’s stuffed under his jacket. The methodology he used to arrive at his 22,500:1 ratio is flawed in that it fails to account for the fact that a single song, made available over a peer-to-peer system, could be copied innumerable times, thus resulting in more than one lost sale to the plaintiffs. Nonetheless, the award is strikingly high given the nature of the offense. The judge has already expressed considerable sympathy for Tenenbaum and distaste for the record industry’s strategy of suing individual file sharers; the argument that a penniless college student should not be bankrupted for a relatively petty offense could well resonate with the court.

Tenenbaum also argued that the damages award violated due process under the standard applied to punitive damages. A punitive damages award which is “grossly excessive” in relation to the state’s interest in punishment and deterrence enters “the zone of arbitrariness that violates the Due Process Clause of the Fourteenth Amendment.” BMW v. Gore, 517 U.S. 559, 568 (1996). Courts examine three “guideposts” to determine whether punitive damages are appropriate: (1) the degree of reprehensibility of the defendant’s conduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the damages award; and (3) the difference between the award and the civil penalties authorized or imposed in comparable cases. Id. at 575. Tenenbaum contended that his conduct was not reprehensible, involving only economic harm not motivated by intentional malice and conduct that “even now many see as having been unauthorized but not morally wrong”; that the Supreme Court has noted that “few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process”; and that statutory damage awards in file-sharing cases in which the defendants lost by default or on summary judgment have been limited to the minimum possible statutory damage amount.

In citing Williams as the standard for assessing the appropriateness of a statutory damages award in the copyright context, and addressing Gore as an alternative argument, Tenenbaum departed from the post-trial strategy employed by Jammie Thomas-Rasset, the other file sharer to seek modification of a massive statutory damages award. Thomas-Rasset was found liable for copyright infringement for sharing 24 songs, and a jury initially awarded the plaintiffs $222,000. The court vacated that award due to concerns over the propriety of the jury instructions concerning liability. After a second trial, Thomas-Rasset was again found liable, and the jury awarded the plaintiffs $1.9 million in damages. Thomas-Rasset moved for a new trial, relying primarily on the standard set forth in Gore, essentially conflating the two tests (“The Due Process jurisprudence that is today embodied in BMW v. Gore has its roots in Williams, a case involving statutory damages”).

Remittitur

Tenenbaum then argued that if the court does not grant him a new trial, it should reduce the statutory damages award to the minimum amount. Remittitur is appropriate where an award is “grossly excessive, inordinate, shocking to the conscience of the court, or so high that it would be a denial of justice to permit it to stand.” Here, Tenenbaum’s strategy mirrored Jammie Thomas-Rasset’s; she also sought remittitur as an alternative to her due process argument. The court recently granted Thomas-Rasset’s request, reducing the $1.9 million award to $54,000.

Tenenbaum argued that Congress set the currently applicable range of statutory damages to combat large-scale commercial piracy of software over the Internet, but did not intend to subject consumers like Tenenbaum to the upper limit of available damages. According to Tenenbaum, Congress sought to remedy the tremendous costs of software piracy to software companies, their employees and the economy – concerns that sound strikingly familiar in the music file-sharing context – but that it envisioned imposing those damages on those who made the software available for download on a widespread basis and not the individuals who actually downloaded them. Of course, Tenenbaum himself placed songs in the shared folder of his hard drive, making them available for download to anyone within his peer network, so it is unclear how, in practical effect, his conduct differed from that of the software pirates, except perhaps in degree.

Moreover, Tenenbaum offered no justification for why the minimum statutory damages amount is the appropriate award, as opposed to some other amount. This omission underscores the difficulty associated with his request; namely, how the court can defensibly set a damages award within such a large range of potential statutory damages. Perhaps the court will look for guidance to the recent decision in the Thomas-Rasset case; there, the judge settled on a trebling of the minimum award per sound recording as the appropriate amount, based on treble damage provisions in other federal statutes.

The Department of Justice, intervening to defend the constitutionality of the Copyright Act’s statutory damages provisions, and the plaintiffs have submitted their briefs opposing Tenenbaum’s motion. A hearing is scheduled to occur on February 23, 2010.

In another major victory for content owners over file sharers, the Central District of California found the owner and operator of a “torrent” file-sharing service liable for inducing copyright infringement in Columbia Pictures Indus., Inc. v. Fung, et al., 2009 U.S. Dist. LEXIS 122661 (C.D. Cal. Dec. 21, 2009). The Fung case reflects the continued evolution of peer-to-peer file-sharing technology since the Napster service was found to be infringing nearly a decade ago. Napster maintained a centralized index of song titles available for sharing and matched a user seeking a particular song directly with a user who had a copy of it. The Grokster, KazAa and Gnutella services did not maintain a centralized index of song titles, but upon request would search users’ computers for a copy of a particular song title and then match the requester with the user who had a copy of it.

In contrast, a torrent user visits a website to find “torrent files” relating to content the user wants to find. The torrent file does not contain the actual content the user is looking for; instead, it contains metadata which allows the torrent software to find and retrieve content from individual users’ computers. When a user selects a particular torrent file for download, the torrent software then identifies multiple locations where the content resides, and downloads pieces of it from all of those locations simultaneously. This approach allows for much faster and more efficient downloading of files and lessens the bandwidth strain on participating systems.

Fung operated a number of torrent websites which provided users with the torrent files necessary to find and share copyrighted content. Under the standards enunciated by the U.S. Supreme Court in Grokster, the court found Fung liable for inducement of copyright infringement.

Secondary Liability for Foreign-Based Activity

Because the Copyright Act has no extraterritorial effect, and the servers that Fung used to maintain his websites were located in Canada, the court addressed as a threshold matter whether the Copyright Act could reach Fung’s conduct. A contributory infringer may be liable for actions occurring abroad which knowingly cause direct infringement within the United States. Accordingly, Fung’s liability hinged first on evidence that users located in the United States used his websites to transmit or retrieve copyrighted content. Though Fung argued that the plaintiffs needed to show that U.S.-based users both transmitted (uploaded) and received (downloaded) copyrighted content, the court found that either act, standing alone, could constitute the necessary direct infringement, since transmission violates the copyright owner’s distribution right and retrieval violates the copyright owner’s reproduction right.

The court found that the plaintiffs submitted “abundant evidence of infringement” using Fung’s websites. Plaintiffs’ expert conducted a statistical study showing that more than 95% of files available through the websites were either copyrighted or highly likely to be copyrighted. Plaintiffs also introduced evidence of direct infringement within the United States by tying together data reflecting the IP addresses and geographical locations of users with downloads of torrent files and sharing of corresponding copyrighted content. The court concluded that this evidence “conclusively establishes that individuals located in the United States have used Fung’s sites to download copies of copyrighted works.”

Inducing Infringement

The court then analyzed Fung’s conduct against the Grokster inducement standard: one who “distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.” Under this standard, “mere knowledge” of infringing acts is not enough, nor are “ordinary acts incident to production or distribution.” Instead, liability is predicated on “purposeful, culpable expression and conduct.”

The court found that “evidence of Defendants’ intent to induce infringement is overwhelming and beyond reasonable dispute.” Fung conveyed a pro-piracy message to users by categorizing torrent files into browseable groups like “Top Searches,” “Top 20 Movies,” “Top 20 TV Shows,” and “Box Office Movies”; posting statements such as, “if you are curious, download this,” with a link to a torrent file for the then-recent film “Lord of the Rings: Return of the King”; and making repeated public statements acknowledging that his activities were illegal, such as, “they accuse us for [sic] thieves, and they r [sic] right. Only we r [sic] ‘stealing’ from the lechers (them) and not the originators (artists).”

Moreover, Fung, as well as various moderators of his sites, actively promoted infringement by providing users with technical assistance in downloading and viewing copyrighted works. Though Fung argued that the First Amendment protected this verbal conduct, the court held that under Grokster, his statements themselves were not illegal; rather, they were probative of an intent to infringe, and supported a finding of secondary liability.

Finally, Fung’s sites implemented a number of technical features designed to foster infringement, such as allowing users to locate and upload torrent files and automating the collection of torrent files from other sites which were well-known to contain infringing content.

As in the Napster and Grokstercases, Fung’s business model depended on “massive infringing use.” His websites generated revenue almost exclusively by selling advertising space. Revenue depended on users visiting the sites and viewing the advertising. Fung admitted that the availability of popular works drove visitors to his sites. He also solicited advertising based on the availability of such works, stating, for example, that his sites would “make a great partner, since TV and movies are at the top of the most frequently searched by our visitors.”

DMCA Defense Incompatible With Finding of Inducement

The court rejected an attempt by Fung to find refuge in the DMCA’s safe harbor provisions. The DMCA shields a service provider from liability for users’ infringement if the provider is unaware of the facts and circumstances from which infringing activity is apparent. If the provider has actual knowledge of infringement, the DMCA does not apply. “Willful ignorance” will likewise strip a provider of the safe harbor; thus, if the provider becomes aware of a “red flag” from which infringement is apparent, the provider may not invoke the DMCA.

Here, Fung plainly knew that his websites made copyrighted content available; Fung himself downloaded such material. Even though his own downloads occurred abroad, beyond the reach of the Copyright Act, he knew that U.S.-based users could access the same copyrighted content on his websites. Evidence produced by Defendants showed that approximately 25% of users were located in the United States, and at one point in time, U.S.-based users accessed Defendants’ websites 50 million times in a single month. Combined with the other evidence of infringing conduct and Fung’s state of mind, Fung could not avail himself of the DMCA. Indeed, the court held that inducement liability and the DMCA safe harbor are “inherently contradictory,” because inducement liability is based on bad-faith conduct “aimed at promoting infringement,” whereas the DMCA is based on good-faith conduct “aimed at operating a legitimate internet business.”

On December 7, 2009, the District of Massachusetts issued a remarkable written opinion elaborating upon its earlier ruling that individual file sharing did not constitute fair use in Sony BMG Music Entm’t v. Tenenbaum, 2009 U.S. Dist. LEXIS 112845. The case stemmed from Boston University graduate student Joel Tenenbaum’s file-sharing activities, which spanned several years and multiple file-sharing services.

The opinion stands out in a number of respects, but most starkly for (1) its eagerness to find any basis to rule in Tenenbaum’s favor and (2) its scathing assessment of defense counsel’s performance. The court was “deeply concerned by the rash of file-sharing lawsuits, the imbalance of resources between the parties, and the upheaval of norms of behavior brought on by the internet,” and did “everything in its power to permit Tenenbaum to make his best case for fair use.” Courts don’t usually go to such lengths to advance one party’s interests, at least not where the party is represented by counsel. Here, Tenenbaum was represented both by a private law firm and by a Harvard Law School professor – a team presumably capable of advancing his interests without an assist from the judge. But this opinion conjures up the image of a judge itching to vault over the bench to argue Tenenbaum’s case for him:

“[T]he court was prepared to consider a more expansive fair use argument than other courts have credited . . . For example, file sharing for the purposes of sampling music prior to purchase or space-shifting to store purchased music more efficiently might offer a compelling case for fair use. Likewise, a defendant who used the new file-sharing networks in the technological interregnum before digital media could be purchased legally, but who later shifted to paid outlets, might also be able to rely on the defense.”

Tenenbaum made none of these arguments, however, and the court deplored – in unusually harsh and explicit terms – his counsel’s performance in the case. Among a litany of other transgressions, the court chastised counsel for litigating the fair use defense “as an afterthought, and literally on the eve of trial,” and characterized the defense as “truly chaotic” and based on “perfunctory” papers. Indeed, Tenenbaum’s papers opposing summary judgment on fair use were structured skeletally, resembling an outline more than a substantive brief; cited only sparsely to the record and to caselaw; addressed the four traditional fair use factors in cursory fashion while emphasizing arguments drawn from unrelated legal doctrines; and invoked generalized incantations of “fairness” more reminiscent of the playground than the courtroom.

Possibly the most interesting insight into Tenenbaum’s defense, however, comes from his own attorney’s legal blog. Following Tenenbaum’s loss at trial, and public criticism of his fair use defense, his attorney, Harvard Law School professor Charles Nesson, solicited feedback in the blogosphere on what alternative defenses commentators felt might have prevailed. In response to one commentator’s list of potentially successful arguments, Mr. Nesson wrote, “these defenses do not join the fundamental issues. this [sic] trial was not an exercise in getting joel off the hook.” The notion that counsel’s job could consist primarily of anything other than exonerating his client should boggle any practicing litigator’s mind. Presumably, Tenenbaum – now saddled with a $675,000 verdict – might wish that his counsel had been more concerned with getting him “off the hook” than with transporting the fair use doctrine to a galaxy far, far away.

Fair Use Analysis

Despite its apparent desire to find in Tenenbaum’s favor, the court correctly noted that the fair use “analysis is not some open-ended referendum on ‘fairness,’ as [Tenenbaum] would have it, but an effort to measure the purpose and effects of a particular use against the incentives for literary and artistic creation that drive copyright protections.” Consistent with mainstream fair use jurisprudence, the court examined each of the four statutory factors and concluded that each one weighed against a finding of fair use. But the court’s overt predisposition in Tenenbaum’s favor unmistakably influenced its reasoning.

For instance, the court refused to “label” Tenenbaum’s conduct as commercial because “there is a meaningful difference between personal file sharing and a business strategy that exploits copyrighted works for profit.” In this respect, the court disagreed with the Ninth Circuit, which found in the Napster case that file sharing was commercial because “repeated and exploitative unauthorized copies were made to save the expense of purchasing authorized copies.” A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1015 (9thCir. 2001). In contrast, the court felt that Tenenbaum’s conduct fell “somewhere in the middle” of a spectrum of commerciality ranging from “pure, large-scale profit-seeking to uses that advance important public goals. . .”

Similarly, in its treatment of the portion of each copyrighted work infringed, the court urged that if Tenenbaum had “just sampled individual songs as a prelude to purchasing the full albums on which those songs appeared[,] [t]hat could well present a compelling argument for fair use.” Tenenbaum admitted, however, that his purpose in downloading songs was not to sample them in anticipation of later purchases, which the court ultimately acknowledged. The disappointment that results when the facts do not support a cherished theory of the case is familiar to many a litigator.

After finding that each of the four traditional fair use factors weighed against a finding of fair use, the court then addressed the creative and unusual “non-statutory factors” that Tenenbaum advanced. These included that: (1) the copyright owners assumed the risk of infringement by releasing their works in an environment where file sharing was rampant; (2) the copyright owners aggressively marketed their works while failing to protect them in any meaningful way, essentially creating an attractive nuisance; (3) Tenenbaum was forced to engage in file sharing because only entire albums, not individual songs, were available for legal purchase; (4) it is unfair for parents and universities to bear the costs of policing the file-sharing activity of children and students; and (5) the “injustice of the action” weighed in favor of fair use.

The court properly rejected each of these arguments, though it viewed some of them with a degree of approval. For instance, because the Supreme Court has suggested that the unavailability of a work for purchase through normal channels is a proper fair use consideration, the court felt that Tenenbaum was “on firmer ground” in arguing that his conduct was excused because he could only legally buy entire CDs rather than individual songs. Nonetheless, by August 2004, when Tenenbaum’s file sharing was detected by the plaintiffs, “a commercial market for digital music had fully materialized,” making the “unavailability of paid digital music [] simply not relevant.”

The opinion concluded by reiterating that the court was “very, very concerned that there is a deep potential for injustice in the Copyright Act as it is currently written. It urges – no implores – Congress to amend the statute to reflect the realities of file sharing.”

This opinion – and the verdict that followed it – should strike fear into the hearts of file sharers everywhere. It is the second staggering jury verdict against an individual file sharer, following the nearly $2 million verdict in Capitol Records v. Thomas-Rasset. Nonetheless, at least one piece of anecdotal evidence suggests that file sharers are not so easily deterred: overheard in the ticket line at a movie theatre over the holidays, one youth commenting to another, “We can just download it illegally online!”

About Naomi Jane Gray

Naomi Jane Gray is a principal in the law firm Shades of Gray Law Group, P.C., where she focuses her practice on intellectual property litigation, prosecution and counseling, with a particular emphasis on copyrights and trademarks.